Category: TIME CAPSULE

THE HOME FRONT

Ireland is now well on the way towards the next general
election. Many observers doubt the ability of the coalition to last beyond this
year, let alone run to full term in mid 2012. Even though it could be argued
that the economy is now in a state of fragile equilibrium (revenue more or less
on target, unemployment more or less static) there is a weary public acceptance
that things will not get easier, that several tough budgets lie ahead and that
the Celtic Tiger chickens are coming home with a vengeance.

Opinion
polls indicate that, whatever about  recognizing that any alternative government
would have to pursue fiscal policies and tough measures broadly similar to those
the government has taken since2008, the electorate seems determined to hold
Fianna Fail in particular (in power since 1997) responsible for bringing the
crash about. Public ire has been compounded in recent weeks by growing awareness
of the human cost of the crash and the necessary remedies, set against the
amounts committed to bailing out the banks. Stealth cuts affecting carers for
the mentally and physically disabled have brought people onto the streets while
public attention has now also begun to focus on the housing and mortgage time
bomb.

For better or worse the government has pursued a particular policy
towards the banks and the developers, including a wide ranging guarantee
covering the banks and their investors.  No one has answered satisfactorily what
the immediate consequences for the economy of not issuing the guarantee in September 2008 would have been.  Yet the issue has
clearly left a sour taste when combined with the money sunk into buying the
banks’ doubtful loans, leaving only a bare cupboard for everyone else. There is
no money to stimulate the economy and little beyond words to offer succour to
those in financial straits, including, for the first time, significant numbers
from the politically important middle class.

Given the Irish attitude to
property ownership, the housing and mortgage situation may prove perhaps the
bitterest legacy of the Celtic Tiger. The economy going belly-up is seen as a
problem for society, or the EU. The debt of the individual is very much a
personal problem. Factor in property and many raw nerves are exposed. The
spending spree on property during the boom touched a great many people.
Properties were remortgaged; equity was drawn down, often for frivolous consumer
spending. But most went into the property boom, fuelling it. Credit, cheaper
than ever before, was widely available. Nearly everyone who could, borrowed.
Young people, first time buyers, scrambled to get on the property ladder while
they still could. And now …the party feeling has been replaced by a
hangover.

Currently the housing market is stagnant. Property prices have
crashed, by between 33% and 50% depending on location. Virtually all new units
bought since 2003 or 2004 (the level to which prices have now fallen) are in
negative equity, and prices have yet to bottom out definitively. Demand has all
but disappeared. Compounding this, the banks, so recently profligate with
lending, have now rediscovered prudence, prompted by a new and tough financial
regulator, and will only lend small multiples of income and no more than 80% of
the cost, further discouraging new and first time buyers. There is no trading up
as those already in at the bottom are crippled by negative equity. Very few new
houses are being built and much of visible construction consists of project
completion on behalf of creditors.  There is no prospect of improvement in the
short term.

The country is sprinkled with “ghost estates”, located mainly
(but by no means entirely) in rural areas. These date from just before the crash
and include partially completed houses, as well as estates and apartment
complexes all but finished but with few or no buyers or occupants. Estimates of
the numbers of unoccupied or unfinished dwellings vary widely but the number is
considerably in excess of 100,000. Many, particularly in the west, are unlikely
ever to be viable. Some form of triage approach appears most likely with some
estates destined to be abandoned or demolished, others earmarked for fire sales
(any fire sales in desirable areas are likely to depress the market
further).

Mortgaged properties in negative equity can be broadly divided
into two – those where the owner is coping and those where the owner is under
pressure on the mortgage (job gone or income reduced or with a short term loan
falling due). The first group face no immediate problem and collectively will
aim to hunker down in the expectation that prices will rise again in the medium
term as the economy recovers.

The pressing problem lies with the second
group and this is now fast becoming a political issue. Many are young or first
time buyers who got mortgages of up to 100%, sometimes more, for amounts of
$250,000 or up. Many are currently in negative equity of at least a third. Where
jobs have been lost there is simply no way the mortgage can be met. The bald
figures are that, at the beginning of July, one in twenty five residential
mortgages (32,321) were three months or more in arrears, a figure expected to
increase rapidly as temporary moratoriums on repayments expire and as interest
rates inevitably rise above the current historic lows. There is no risk sharing
with Irish mortgages. The keys cannot be handed back. The borrower remains
liable for the full amount of the loan – a financial albatross which threatens
to retard the pace and strength of any economic recovery.

The government
has, up to now, approached the issue warily. The lending institutions were
prevailed upon initially to delay taking action over arrears and so far this has
worked in most cases. This is probably due as much to the weakness of the
institutions (what would they do with a surfeit of repossessed properties in a
falling market in any event?) as to the government’s entreaties. In early July a
government-sponsored expert group suggested a negotiating process for borrowers
in difficulties but left open the option for the banks to repossess failing all
else. Time will tell how successful this approach will be. The last thing the
government wants is a flood of repossessions and /or bankruptcies affecting
ordinary people.

The group’s next report, due in September, is to deal
with the elephant in the room – negative equity – and is expected also to
consider the hot potato of possible debt forgiveness. The debate on this has
already begun, focussing on possible percentage write downs by the lenders, and
/or the state assuming part of the loans. Among the arguments against are that
writing down would further weaken the banks and that the state has no money to
intervene. A further point has been made that to bail out those in trouble
would invite “moral hazard”, i.e. the delinquents – or others – would do it all
again given the chance. I cannot recall morality being invoked when the banks
and developers were being rescued! And if the banks merited help for the benefit
of society, who is to say that people do not? This one will run.

“BIG BOYS GAMES, BIG
BOYS RULES”

A process of change has begun which seems destined to alter
fundamentally the Eurozone. Precisely where this will end is not clear, but
there have been  mutterings from the German Chancellor that the entire European
project could be at risk unless firm remedial action is taken. The cumbersome EU
decision making machinery is now beginning to grapple with the
task.

Recent weeks have not been good. The sticking plaster solution
designed to bail out Greece and forestall bankruptcy failed from the off to
inspire international confidence. With fears growing of  potential threats to
Portugal and Spain it became necessary to revisit the situation . A much larger
rescue plan was hammered out involving agreement on a bailout fund of a trillion
dollars to be financed  partly by the IMF and reluctant agreement by the
European Central Bank to buy government bonds from the weaker Eurozone
economies.

The brave face  put on the plan was that it would forestall
speculation and thus might never have to be activated. The omens are not good.
Overall deficits (i.e. more borrowing) continue to mount, there is evident
resistance in the weaker economies to the spending cutbacks and extra taxation
being demanded and clear differences between and within countries on the best
approach to follow. The plan’s call for increased monitoring from the centre on
individual annual budgets of member states has had a mixed reception.

Economic comment has been that Europe has bought time – the suggestion
being three years – but in a globalised economy this may prove over optimistic.
Market reaction has seen the value of the Euro drift down against the Dollar and
Sterling, shares fall and worry that the international economy may be
precipitated into the much feared “double dip” recession. This last would, of
course, cancel all bets for the short term, but assuming it does not there is
little doubt that the Euro saga has some way to run.
.
The nuclear
reform option would be full or decisive fiscal control from the centre over
individual countries’ budgets. This is feared, particularly in Ireland, as
opening the door for eventual central control over national taxation,
threatening our advantageous – and vital – rate of company taxation and with it
our attractiveness to foreign investors. The anti-Lisbon lobby has now
re-emerged to shout “hands off”, citing threats to our sovereignty. The
government has uttered reassurances that no change to our fiscal independence
within the EU is on the cards and pointed to our continued power of veto over
taxation issues.

This is true in respect of the EU. Whether and for how
long it will apply within the context of membership of the Eurozone is another
matter. Ireland continues to borrow $450 million per week just to run the state
– including  generous provisions for unemployment benefits and (untaxed)
children’s allowances. Our continued ability to borrow rests ultimately on the
confidence of lenders. If there is no confidence there will be no money. This
was about to happen with Greece. Hence the rescues. Hence also the need to
address the emerging weaknesses in the Euro.

Crucial to this confidence
is the attitude of Germany and what happens to the Euro. There is a big picture
here, one that is not immediately apparent and is often overlooked. The last 40
years have seen the slow emergence of a European superpower built primarily
around Germany and her economy. This emerging power is within but not synonymous
with either the European Union or NATO. At times its progress has been slow or
stagnant. At times it has made quantum leaps, which have then had to be digested
and accommodated. Its institutions and borders are incomplete or ill defined yet
their general shape is emerging.

Veteran observers of the Brussels scene
will be familiar with the landmarks in this process. In the 1970s the
transformation institutionally of the EC with the creation of the European
Council structure and the groundwork for a common EU foreign policy (now  a
common foreign and security policy). Next the establishment of regional and
cohesion funds to assist poorer areas, the first groping towards a system of
economic and monetary union and the launch of the Single European Market in
1992, aimed at eliminating internal national  barriers to trade.

In
foreign relations there was the opening of serious dialogue with the communist
bloc, through the CSCE, which, at a non-military level acted as a stimulus to
dissent and fragmentation of the bloc. When communism collapsed there came
German reunification.
The EU then moved swiftly to begin a process which
led, in just over a decade (2004) to a major expansion incorporating most of the
former communist states of Central Europe, with the promise of more to follow.
Under the Schengen Agreement most continental EU members, including the
newcomers, as well as Iceland and Switzerland, have relaxed or eliminated border
controls (one visa fits all). Britain and Ireland have remained outside.

There was also, most importantly, the launch of the Euro, with Euro
currency circulating from 2002 in (now)16 of the 27 EU states. One major player,
Britain, has stayed outside, and most of the 2004 accession states are not yet
ready to join. Here’s the rub. The original rules for the Euro, including fiscal
prudence, have proved inadequate, hence the current crisis. Germany, which gave
up its beloved Deutschemark for the Euro, and prompted by an increasingly
impatient electorate, is pressing for greater controls over national budgets
with enforceable sanctions for laggards.

There is a clear division
within the Eurozone, with the PIGS plus Italy, the major offenders, with yawning
budget deficits and heavy national debt. In recent negotiations the carrot
option seems to be out; the stick remains, with modalities to be worked on in
the coming months. There are emerging public differences between the German
Chancellor and the President of the EU Commission on the need and desirability
of revising the Lisbon Treaty. Given the way Europe normally disposes of
problems, in the short run a compromise solution seems likely. It may prove
unpalatable, but one that can be lived with, for now.

But if the Euro is
to survive, more radical measures will eventually be called for. At a certain
point in this process, possibly sooner rather than later, all cards are likely
to be on the table. The Eurozone is a major plank in the world’s financial
structure with four of the world’s ten largest economies in it. Ireland is a
minnow. The German and French economies are  roughly 15 and 11 times the size of
Ireland’s. It would be naïve to assume that our sensitivities will count for
much if the very future of the common currency, fundamental to the European
project, is at stake.

It should not be forgotten that  our existing
favourable company tax rate itself has evolved from zero, under pressure and
after negotiation. Europe has been good to Ireland, and we have been lucky,
partly because we are small. At present our budgetary strategy has found favour.
We cannot go it alone. We should be wary of declaring  anything unacceptable
from the outset.”

THE PIGS WON’T LIKE IT
Several
years ago a story briefly did the rounds of the European media. It  was to the
effect that  concerns in Germany  regarding  the stability of the EURO were
prompting some customers to  demand “German” Euros from their banks while
rejecting Euros from other EU states, particularly those from southern Europe.
Euro notes and coins have identifiable national markings which made such an
exercise possible. The inference was that, in the event of a meltdown in the
Euro, Germany could withdraw from it and recognise only its “own” currency. The
story was quickly rubbished as totally unfounded and far-fetched.
The Euro,
in circulation since 2002, is now in use in 16 of the 27 EU members including
four of the world’s ten largest national economies. More importantly, it
replaced one of the four major world currencies, and the pivotal European one,
the German Deutschmark. German participation was an act of faith in the new
currency. This core reality is often overlooked. The Euro, from the beginning,
was invested with the strength, stability and reputation of the Deutschmark.

Anyone familiar with the development and launch of the US Dollar two
centuries ago will know how difficult it was to merge and replace the currencies
of thirteen disparate pre-industrial economies. How much greater the challenge,
then, of attempting the integration of most of the major currencies of Europe
(Britain remained outside), bearing with them their fiscal and budgetary
baggage. There were reservations at the time about the adequacy of the Euro’s
control mechanisms, including the 3% ceiling on budget deficits. These were
brushed aside in the euphoria of the occasion.
It has since become apparent
in the Euro era that, without political union, the scope for imposing budgetary
discipline among errant Euro members is limited. This is hardly surprising,
given that the countries concerned are functioning parliamentary democracies,
with regular elections and electorates increasingly impatient with politicians.
The path to re-election is one of making promises; keeping them costs money. The
path to defeat is to seek to raise that money by higher taxes. The end result,
across Europe, has been steady increases in borrowing by governments over
decades to pay for promises made. In an era of growth and low interest rates,
debt could be handled, or fudged.
Who, after all, would lie awake worrying
that the national debt was 50, 70 or even 100% of GDP? And who took seriously
complaints and warnings from the European Central Bank if a country’s borrowing
exceeded slightly the permitted annual ceiling? The excess could be corrected in
the next year, or be postponed further if an election loomed. 3% became
aspirational rather than mandatory. The Germans might grumble, some fines might
be imposed, but, as long as the Euro prospered, problems could be seen off.
Sticking plasters rather than radical treatment became the order of the
day.
The last year has seen reality dawn and the flaws and fault lines in the
Euro zone exposed. First came Ireland, as the air escaped at pace from the
Celtic Tiger. A country running substantial budget surpluses collapsed into
deficit – and how! It will take four years to sweat down Ireland’s current
double digit borrowing requirement to 3%. Ireland was lucky; overall government
debt had been low after the good years, so some massive borrowing was possible.
Ireland was also amenable to good advice once its leaders grasped how serious
the situation was; spending, including public sector pay, was slashed. Ireland,
so far, has taken her medicine.
Greece came next, and, on a Richter scale of
calamity, the Greek situation scored higher than the Irish one. A small economy,
with almost $400 billion in debts, no tax base to speak of and a feather-bedded
public sector and welfare state, held its hand up late last year and revealed
that the last government had lied about the extent of its economic mess. As the
weeks went by it became clear that Greece had no hope of tackling its debt
crisis unaided, and, critically, was unlikely to be able even to roll over the
portion of the debt due in 2010. Moreover, any default by Greece would expose
two other dominoes, the remaining PIGS, Portugal and Spain, both with serious
financial and fiscal problems. Were Spain, the ninth economic power in the
world, to go belly-up, the results would be catastrophic, certainly for the
Eurozone, possibly for the global economy
Saving Greece, therefore, has
become a combination of damage limitation and self preservation for the rest of
the Eurozone. A three year rescue plan was agreed in early May under which
Greece will be loaned up to $150 billion by other Eurozone countries and the
IMF. Inter alia, Ireland, currently borrowing $500 million per week just to keep
going, will borrow $1.7 billion more to lend to Greece, as her share! It remains
to be seen whether this plan will work, how the markets will react in the coming
months and in particular whether the Greek public will accept the severe
measures imposed as Greece’s part of the bargain.
Politicians and Eurocrats
are currently scrabbling to find more lasting solutions within the existing
rules. However, it is difficult to see the Euro survive unless the current
arrangements are overhauled. At the very least a new system of control over
national budget deficits will have to be worked out. The stakes are high.
Individual national sovereignties are at stake. A special Intergovernmental
Conference would be necessary, with treaty revisions to follow. Given how
jealously countries such as Ireland have defended their control over national
taxation there must be considerable doubt that this method of reform would
succeed, hence the sticking plaster approach. The issue is further complicated
by the fact that one major EU country and currency remains outside the Euro –
Britain and Sterling. All in all, an appalling vista.

In the short term the
Euro will probably stagger on. Critical is the attitude of Germany. German
public opinion is already seething at bailing out the Greeks ( the arguments are
along the lines of why should hard working thrifty Germans bail out a country
where people can retire on pension in their mid-50s) but the German government
is seized by the argument that it’s better to hang together than separately.
They may also calculate that a weak Euro will give a much needed boost to
Eurozone (and German, and indeed Irish) exports, aiding overall economic
recovery. They probably also shrink from the formidable task of reforming the
Euro.
What else could happen? Orthodoxy asserts that no country can be
expelled from the Euro, that no country could leave the Euro and that a two-tier
Euro (the Northern states and the PIGS, with Ireland and Italy disputing the
“I”) is unworkable. In short, there is a fixation with the status quo, if only
because of the appalling vista scenario and an unwillingness to think the
unthinkable. If the Euro goes down in flames there will be massive direct and
collateral damage. The coming months could be interesting times. Some at least
will start checking their Euro notes for the serial letter X – the code for
Germany.

LIES, DAMN
LIES….
…AND STATISTICS.
.

Here are a few to reflect on:

YEAR                      GDP                       GDP per HEAD                   NATIONAL DEBT                    DEBT AS % TAGE

1987               €25,724 billion                 €7213                              €30,085 billion                            115%

2000                 €104,553 billion           €23,503                               €39,490 billion                                 38%

2007                €189,751billion         €45,000                           €38,000 billion                                        25%

2009                 €171,000(est)           €42,000                            €75,000 billion                             64% est.

The Economy returned to centre
stage with a bang in the run up to Easter, with the launching of NAMA and the
revelations of the cost of bailing out the Irish banks. The fallout continues as
I write, with public outrage and shock at the amounts involved and media
commentators and politicians shouting about fiscal and financial Armageddon and
a debt burden that will continue for several generations.

The facts seem
stark. The building and developing boom collapsed in 2008, throwing the banks
which had financed it into financial crisis. These included the two major
systemically important Irish banks, Allied Irish and the Bank of Ireland, which
cater mainly for the retail market, but also Anglo Irish Bank, a non retail bank
which had specialised in loaning to developers, and a savings and loan type
institution, Irish Nationwide Building Society. With the spectre of a major bank
default looming (just weeks after Lehman Brothers) the Government, at the end of
September 2008, issued a blanket guarantee for bank
loans, deposits and bonds. The last 18 months have seen the Government grappling
to come to terms with the banking crisis as its extent has slowly become clear.
This has included taking over Anglo Irish Bank, which has effectively ceased to
function.  During this period bank credit has virtually dried up, with serious
knock on effects for the economy.

The main instrument for cutting what
has become in effect a financial Gordian knot has been the setting up of NAMA –
the National Asset Management Agency – to relieve the banks of their major
development loans (bad, doubtful or otherwise). NAMA has begun “buying” the
loans by issuing, in effect, IOUs which the banks can redeem from the European
Central Bank, and thus start lending again. NAMA’s notes are issued at a
discount on the banks’ valuations of the loans (euphemistically referred to as a
“haircut”) and, in theory, when the property market recovers (in say, 8-10
years), the properties can be sold by NAMA to recoup some or all of the state’s
investment (a similar smaller-scale scheme in Sweden in the 90s actually netted
a profit for the state).

While the cost will be spread over a number of
years and there is the prospect of getting at least some of it back as assets
are sold, what has outraged public opinion has been the scale of the rescue
required, with a figure of roughly $45 billion being bandied about, and the
distribution of the potential losses between the institutions concerned.
Anglo-Irish Bank alone is set to cost roughly $30 billion, with the threat of
another $14 billion to come; the Irish Nationwide a further $4 billion. The two
main banks – used by most of the public – account for $11 billion. As if this
were not enough, the discounts extracted by NAMA will have the effect of
reducing the capital bases of both the Bank of Ireland and Allied Irish Banks,
thus reducing their lending capacity and ensuring that credit will continue to
be in short supply for some time, unless fresh capital is injected by the
taxpayer.

While all this is painful, it could have been borne with
public resignation, like the other economic steps the government has taken.
However, the realisation that Anglo Irish Bank is in effect a zombie bank,
casting doubt on whether there will be any return for the $30 billion, could
prove the last straw.  A debate on whether it would be cheaper to close the bank
forthwith is underway with the government saying it would cost much more and
that the state cannot default on its debts but being tight-lipped about giving
details. Opposition politicians and some commentators are demanding
clarification and more information. The public mood has not been helped by the
spectacle of the principal architects behind the Anglo fiasco walking around
with impunity.

Current projections for government borrowing – which,
remember, continues at $400 million plus per week just to keep the country
running – envisage it peaking at 85-90% of GDP in 2014.  These are admittedly
before factoring in the cost of funding the bank bailouts and are based on
continued adherence to the strict programme of control and fiscal rectitude on
which the government embarked in 2009 and on a sustained global economic
recovery. Granting these two conditions Ireland’s peak borrowing would have been
no worse than many other Euro zone countries, as well as Britain. Adding on the
additional burden of bank debt, whatever that proves to be over the next four
years, will obviously affect these calculations, for even if the debt itself can
be rolled over (the way all Western style governments deal with debt), the
annual cost of servicing the total debt will have to be met through further cuts
or higher taxes.

There is no doubt therefore that the bank bailout will
add considerably to the government’s woes and also to Ireland’s national debt!
However, as can be seen from the rough figures at the top of this article we
have a long way to fall to reach the depths (and debts) of 1987. Back then the
country really was broke, with a generalised recession, double digit inflation,
unemployment at record levels (17% at a very conservative estimate), a
spiralling national debt almost one fifth greater than GDP, together with
historically high interest rates (I unearthed recently a letter of that era from
my bank manager giving me the good news that my mortgage interest rate was being
cut to 16 %!).  In the 20 years that followed, GDP grew by almost 700%, the
workforce doubled and the whole (rising) population benefitted from higher
incomes, better benefits, services and infrastructure, as well as lower taxes.
Even with the “hits” we have taken in the last two years, comparisons with 1987
are risible. It is worth noting that the story that dominated the media in March
before the bank bailout related to queues at the Passport Office and the backlog
of 40,000 applications (1% of the population). Those waiting were overwhelmingly
heading for Spring holidays. Recession? What recession?

This is not to
deny there are huge problems with the Irish economy. There are, and one is
coming steadily down the rails, for the most part ignored, as public attention
focuses on the latest high visibility story. For while states can roll over
debt, individuals cannot. The level of private debt is awesome, much of it in
the form of mortgages (over $200 billion), many in respect of properties in
negative equity, others to finance the autos and second homes that marked the
Tiger years. This was certainly not the case in 1987. With interest rates set to
rise over the next year this slow squeeze may well prove more damaging than
anything a bank rescue can inflict. There is no sign of a NAMA Mark
Two.

—
6ytyt

IRELAND OF THE WELCOMES

“It’s Not Cricket!” proclaimed the headline reporting on a recent Dublin
Court Case. The case caused some amusement here but had a serious dimension to
it. It concerned a Pakistani national who had come to Ireland as a member of a
cricket team in 2008 and stayed on. He was scheduled to marry a Latvian teenager
here when the Gardai stepped in as part of an investigation into the large
number of marriages taking place in Ireland between men from outside the EU and
young women from EU member states in Eastern Europe. The increasing numbers of
such unions ( 544 in 2008, 1100 in 2009) suggest a racket with the prize for the
male a ticket to residence in Ireland (and the EU) and for the female a sizeable
cash sum. The investigation continues.
This saga is but the latest semi-humorous incident involving immigrants. Several years ago a band from
Eastern Europe with 50 members was admitted to take part in a fictitious music
festival; the members promptly disappeared. A moment of black humor occurred at
a Dublin port before 2004 when a heavily pregnant Nigerian woman was refused
admission after an on-the-spot examination revealed that birth was not imminent.
A young Nigerian, deported back, was readmitted to complete his school
graduation; he later became father of an Irish citizen.
Recent months have also featured media stories about third country nationals seeking either to
remain in or to gain entry to Ireland. Several court cases are in train
involving African women and girls seeking to stay in Ireland following rejection
of their applications for political asylum. Some of the cases made have cited
the threat of female circumcision if they are returned whence they came
(Nigeria). Other cases have involved men in relationships/marriages here with
other non-EU nationals who have pleaded that deportation would impact
unfavourably by splitting families up. Media attention in January focussed on a
young Eritrean girl whose DNA test proved that she was an Irish citizen, giving
her, inter alia, the right to enter and live in Ireland.

The message is clear. It is not about whether or not a person meets the criteria as a political
refugee or whether or not someone has discovered true love far away from home.
What unite these stories and others like them are the lengths to which desperate
people from the developing world (or poorer countries on the fringe of Europe)
will go to stay in a first world country. Ireland has now graduated to becoming
a fully paid-up member of the top table, the small number of affluent states
which have become magnets for the less well off. The parallels with 19th century
Irish emigration to the USA are clear, even if the world has moved on since.
Ireland now has its own domestic undocumented issue. We are not unique; the
pattern is replicated across the EU. What is new is that it is the first time
Ireland, for so long a country marked by emigration, has experienced significant
immigration, with all that it entails.
Ireland has experienced two waves of immigration since the mid 90’s, essentially different in nature and scale though
there was some overlapping. The influx which has attracted most attention came
post 2004, following the entry into the EU of the countries of Central Europe.
Ireland, hungry for jobs to fuel the booming economy, welcomed entrants from the
Ten without restriction. The result has been an influx of around 500,000 in five
years (most from Poland, Lithuania, Latvia and Slovakia) and even if some have
drifted on as the economic bubble has burst, enough have stayed to register
significantly in the ethnic make- up of the country. As EU citizens they are, of
course, entitled to enter live and work in Ireland, as Irish citizens can
throughout the EU.

The other, smaller, inflow began earlier, around 1996, and continues. It represents immigration from poorer countries, some
initially from Central and Eastern Europe, but considerable numbers from
countries in Africa, Asia and the Middle East. The story of this immigration is
not easy to piece together. Irish author Roddy Doyle remarked, whimsically, that
he went to bed in one country and woke up in a different one. It took a bit
longer than that. Many presented as asylum seekers. Ireland has no land border
with a poorer neighbour, and indeed, until very recently, no direct air links
with countries outside Western Europe and North America. Despite this, and
despite also a 1996 EU agreement (ironically, the “Dublin Convention”) under
which persons seeking political asylum in an EU country  must do so in the EU
state in which they first arrive, the number of applications for asylum in
Ireland took off sharply from 1996 onwards. 424 in 1995 grew to 1179 in 1996 and
to almost 11,000 by 2000. People arrived on planes, walked into police stations,
got off ferries from Britain or France, or were found smuggled in containers
arriving at Irish ports (some, tragically, discovered dead on arrival). To these
should be added thousands who arrived for short visits or to take up work or to
study and who stayed.

Once on the map as a possible destination,
Ireland’s attractions were fairly obvious. An EU member  state (with promise of
unrestricted travel), relatively prosperous and with an expanding economy as
well as a fairly relaxed and liberal attitude towards new arrivals at a time
when other European countries were tightening entry requirements.  A major extra
attraction was that until 2004 Irish citizenship applied to everyone born in
Ireland (with some inconsequential exceptions) – not the norm in Europe.
Predictably there was a surge in the numbers of births to non-nationals as the
century turned. A logjam of applications for asylum meant long delays in
processing, with consequent family and humanitarian considerations coming into
play as months became years.  Most non-Irish parents of Irish born children were
permitted to remain. By the time of the 2006 census quarter of a million Irish
residents had been born outside Ireland, Britain or the USA, a far cry from
1991, when the figure was 40,341. Though this figure included 120,000 from the
new EU countries, 35,000 gave their nationality as African, 47,000 as Asian. The
100,000 or so non-EU/non-US present in 2006 (and their families) represented
roughly 2% of the population.

Though the annual asylum applications have
dropped to below 4000 in recent years, the welcome has been wearing thin here. A
gradual tightening and harmonisation of entry controls throughout the EU has
been reflected in Irish immigration procedures. New arrivals claiming asylum are
now housed in hostels and not permitted to work. A referendum in 2004 ended
automatic citizenship for those born in Ireland, while citizenship through
marriage has also been restricted. Freedom of access for the new EU nationals
has mopped up job opportunities, particularly as the recession bites. Impending
legislation threatens to speed up the processing of new arrivals and increase
the pace of deportations. Yet given where they come from, is it any wonder that
they still try to come?

A LONG TIME IN POLITICS

British Prime Minister Harold Wilson once remarked that a week is a long time in politics. Indeed. And three months can be an eternity. On December 1st last Brian Cowen’s government seemed on the ropes. The recession was biting savagely, negotiations on cost cutting with the public sector unions had ended in fiasco and a savage, benefit and wage slashing budget had become inevitable. Fianna Fail was in the doldrums in the opinion polls, trailing its chief rival, Fine Gael, by a wide margin.
Three months later, the scene looks different. The budget was successfully navigated. There may be disruption ahead in the public sector, still smarting over the pay cuts, but the issue does not appear to have caught fire. There has been only muted reaction from those affected by the welfare cuts. Overall the public mood has been one of relief that the draconian budget proved less so than feared.  There are some signs of economic recovery, though the signals are mixed. International opinion, deeply sceptical beforehand that the government would take the necessary measures, has been fulsome in its praise. The cost of borrowing (for it has not stopped – but continues at $400 million per week) to keep the country afloat has even reduced slightly.
Ireland is now something of a darling of the international economic press. There are no more analogies with Iceland. The new EU bad boy is Greece, where a new government discovered its predecessor had been economical with the truth where the public finances were concerned. Suddenly there are fears for the stability of the Euro, with the participating countries (which do not include Britain) now divided into two – those who practice economic and financial prudence and those who do not, but run huge fiscal deficits. Ireland currently occupies a grey area in the middle; having fallen from grace we appear to be bouncing back up, thanks to the government’s firm actions. Some commentators have even begun to replace Ireland with Italy in the “PIGS” group alongside Portugal, Greece and Spain (“PIGS” was the unflattering acronym used in Brussels to identify the four “poorer” countries receiving special subsidies from the EU before the – much poorer – Central Europeans were admitted. It stuck in the Euro era to identify the fiscally weaker members).
These are still early days. The immediate concern when the Greek crisis broke was to cobble together a short term solution to head off any possible domino effect were Greece to default on an early maturing $30 billion debt, threatening next up Portugal and Spain. Any lasting solution to the Eurozone’s problems will probably feature the major paymaster, Germany – which will have to do most of any necessary bailing out – exerting some control over other Eurozone members’ budgets. Watch this space.
Domestically, also, things may be looking up politically for the government. Last year’s by-election and local election losses and the depths to which Fianna Fail slumped in the polls (trailing Labour at one point) represented the nadir. Since then there has been some recovery but the party has continued to languish far behind Fine Gael in popular support. However, even allowing for an expected upturn in support after mid-term disaffection, and even possible brownie points for acting tough, the odds have been squarely on a change of government at the next election (which must take place by June 2012 ). The electorate continues to place the political blame for the economic collapse firmly on the government and on Fianna Fail in particular. The coalition partner, the Greens, which was decimated in the local elections, has stuck with Fianna Fail on the Benjamin Franklin maxim that if they don’t hang together, they’ll hang separately.
The scenery changed in the second week in February with the departure from active politics of the high profile Fine Gael TD, George Lee.  Lee, the former economic correspondent for the national broadcaster RTE, was elected to the Dail in a by-election only last June, gaining a whopping 53% of the vote. His declared aim was to do something about Ireland’s dreadful economic situation. His resignation, from both his seat and his membership of Fine Gael, after just 8 months has been accompanied by ill feeling and recrimination. Lee declared he was quitting through frustration at his inability to achieve anything and at his treatment at the hands of Fine Gael, which had ignored or sidelined his talents and expertise. Fine Gael’s reaction has been a circling of the wagons and closing of the ranks behind leader Enda Kenny. They, and many neutral observers from the media, have focussed on the shortness of the period allowed by Lee to make an impact, and the opportunities on offer to him, which were his to develop. Some have asked what, in any event, he could have hoped to achieve in the short term by joining the opposition.
It’s a debate in which there can be no winners but at least one loser. Enda Kenny was already under fire for two recent less than impressive media appearances (in one of which he stumbled over his attitude to forming, hypothetically, a government involving Sinn Fein). Having brought Fine Gael back from near electoral oblivion in 2002 to a credible alternative party of government in 2007 (how many remember how close he came to government then?), and having since built up an impressive lead in the polls, there was a high level of agreement among pundits that, barring something major, Enda Kenny was set fair to become Ireland’s next Taoiseach. The Lee affair, and the fallout from it, together with the media performances, have now raised doubts. Could he not have handled, and harnessed, Lee better? For the moment criticism is muted but if the next few months see Fianna Fail gain an electoral “bounce”, for whatever reason, then the mutterings against Enda are likely to increase and the Lee affair is likely to surface again. Whatever happens, Fine Gael have been damaged; it remains to be seen by how much.
In retrospect the Lee episode was a distraction. His election came at the high watermark of public disillusionment and dissatisfaction with the political and economic situation. Much of the population were in denial and were seeking scapegoats or an instant solution.  Lee was seen as someone untainted and determined to do something to put it right. His throwing in of the towel so soon has come as a shock. Yet the period since June last has seen some progress towards finding a way out of the economic morass, not least in the growing public recognition of the seriousness of the situation and what needs to be done. It would be unfortunate were Lee’s departure to affect this. Our troubles are the outcome of a reckless property bubble in tandem with an international economic recession. Like other economic bubbles ours will have to work itself out, with considerable temporary pain. There’s no way to avoid this. And, as we now know, Ireland is not the worst.

Greece, equally recklessly, hid the truth until it was almost too late. Let us hope it can be rescued. Timeo Danaos….?
END

CHECKING IN WITH REALITY
Ireland 2009. How to describe it? The Year of Reality?  The Year the Party ended? It wasn’t the best of times; but was it the worst of times? Two surveys, before and after the New Year, found that most people were enjoying their lives as much as ever, despite the recession. Moreover, as proof that there is life apart from economics, media interest in December and after also switched focus away from its obsession with the country’s economic difficulties, though the alternate headlines hardly made for light reading.
The most persistent non economic story of the year, that of clerical abuse of children, surfaced again in December with the publication of a second highly damaging report, this time on clerical sexual abuse in the Archdiocese of Dublin. The first, in May, had focussed chiefly on the so-called “industrial schools” of the previous half century, including Artane and Letterfrack, administered by a number of religious orders. It described a regime of systemic abuse, physical and sexual, inflicted on the inmates, mainly children from poor and underprivileged backgrounds. The report’s conclusions were clear and damning with regard to both the religious orders involved (the Christian Brothers in particular) and to the Irish Department of Education and pointed firmly to a cover-up by the religious concerned.

The December (Murphy) report addressed allegations (a “representative sample”) of sexual abuse of over 300 children by 46 priests in the Dublin archdiocese over 30 years to 2004 i.e. at clergy in the front line attached to parishes. It found most of the allegations to be well founded, noted that some of the priests concerned were dead, and that 11 had been convicted by the Courts. Disturbingly, it found that, at least until the mid-1990s, the Archdiocese’s preoccupation had been to maintain secrecy and to have a “don’t ask, don’t tell” approach. Four former archbishops were criticised as well as auxiliary bishops during the period (four of five of whom have resigned, prompted by public opinion and pressure from the current Archbishop, Diarmuid Martin).  In its wake, conscious of the damage, real and potential, Cardinal Brady and Archbishop Martin met with the Pope. There is little doubt that, despite the fact that only a small percentage of priests were involved, the report has dealt another body blow to the flagging authority of the Irish Church.

Some relief was afforded to the beleaguered Hierarchy as a severe spell of weather more in keeping with the American Mid-West than an Irish winter hit the country over Christmas and the New Year, driving everything else off the front pages. The worst weather in almost fifty years, following on heavy flooding in November, may or may not be down to climate change, but it served as a timely reminder of the type of winter we would face if anything were to deflect the Gulf Stream. Unsurprisingly the authorities were unprepared for an extended freeze and public opinion, charged with a sense of entitlement, was highly critical as supplies for road clearing became exhausted. Yet, overall, the public mood remained upbeat, reflecting what many commentators are pointing to as indications that the worst economically may be over.

Whether we are actually at the end of the beginning, there are some positive signs.  2009 was certainly a year in which for many a different reality dawned. The huge rise in unemployment over the last two years saw tens of thousands of families lose one income, a smaller number lose two. For a generation which had become accustomed to prosperity and  rising living standards,  on an unprecedented scale, and had planned ahead on that basis, the shock was psychological as much as economic.  The job market simply dried up. Recovery or not, nobody doubts that difficult years lie ahead. The jobs lost over the past 18 months will take much longer to replace, and will not be in construction!

However, as the dust has begun to clear, some perspective becomes possible. Yes the number of unemployed increased dramatically – by 8% of the workforce in two years. But for most people 2009 was a year for treading water. Life continued pretty much as before; taxes were increased, reversing a trend. There was less money around and prudence and caution emerged where spending it was concerned. There was apprehension, certainly, as jobs disappeared and as the country’s finances went into freefall. There was particular concern regarding job prospects for the young, who as a group were hardest hit.  There was hysteria in the media and among politicians. But it is now becoming apparent that the recession was concentrated, hitting some sectors very hard, some hardly or not at all. Building and related activities suffered severely. There was a shakeout as some multinationals restructured in the context of the international downturn, and another as some featherbedded companies went to the wall. The retail sector took a hit, particularly in sales of luxury consumer items, such as automobiles. But other sectors (pharmaceuticals, high-tech) continued as before. Overall our exports in 2009 appeared to buck the worldwide trend (decline) by holding up.

There are tentative signs (flattening of unemployment, stabilisation of tax revenue) that economically the worst may be over.  If this proves the case, a contributing factor will be the infusion of confidence brought about by the December budget. For once an act of policy ticked most of the right boxes. Most of the sacred cows went down like ninepins (sorry about that!) as the government followed through on its promises to cut government spending. Wages in the public sector were slashed, benefits were cut and inroads were made in the huge budget deficit. There were no new taxes apart from a hike in fuel taxes dubbed a “carbon tax”. There were some perceived injustices among the welfare cuts, where there was insufficient tweaking, but these can probably be rectified at a later stage. Overall however the budget was greeted with relief (just as it had been awaited with trepidation) and as a sign that the government was serious about setting the country to right. It’s only a first step; to adapt a recent Flanna Fail election slogan “some done, much to be done”.

The economic and social challenges facing the government in 2010 are reasonably clear. Unemployment is unlikely to decline and this will generate a situation where an unprecedented number of people will shortly be without work for 12 months or more. Training and retraining will become priorities and a debate has already started on this. The issue of negative equity as a consequence of the collapse in property prices will feature more and more as the numbers of unemployed unable to pay their mortgages increases. In a society which sets such store on house ownership, and where repossession and eviction generates high emotion, this issue promises to be the hot political potato of the year. There is no easy solution.

Finally, I must record, sadly, towards the end of the year, the passing of two icons of Irish music, Liam Clancy and Ciaran MacMathuna. No letter from the Motherland could or should fail to salute their enormous contribution to Irish culture everywhere.

NOT BY BREAD ALONE
Ireland, the USA, Australia and New Zealand have many things in common, not least historical Irish communities, a common language, a common legal system and a passion for sport. One link, not immediately apparent, is that in none of these sport- mad countries is soccer the number one spectator sport, in contrast to most of the world. There are historical, sociological, and developmental reasons for this, but what can be stated, with a reasonable degree of certainty, is that, in three of the four, failure by the national team to get to the soccer World Cup finals ( to take place in South Africa next summer) would not be a major news event. The odd one out is Ireland, where failure to qualify, and the circumstances surrounding it, dominated the media here (and indeed in Britain and France) for several weeks after November 19.

The explanation is simple. Soccer in Ireland is largely urban and working-class. It is also underfinanced and in constant competition for players and support with both Gaelic football and rugby. The most talented players have traditionally gone to England. However, the proximity of England, the presence there of a large Irish community and the free availability in Ireland of British and satellite television showing English soccer matches, has generated enormous interest in and support for soccer, albeit at one remove, throughout Ireland. Every week hundreds cross the water to attend games involving their favourite English teams. Add in traditional support for the man (or woman) wearing the green jersey and it is easy to understand why the fortunes of the national soccer team are front page news.

In 2009 the success of the team was invested with a new element. The country is in economic crisis, there is very little good news, and things have not been as bad for 20 years. Back then, in 1988 and more famously in 1990, the Irish soccer team achieved a level of success unequalled before or since, reaching the World Cup quarter-finals in Italy in 1990. Whatever about the footballing merits of the team’s performances (they reached the last eight without actually winning a game – advancing on a penalty shootout), in the rosy hue of nostalgia they are seen as having lifted the spirit of the nation at the time. Fast forward two decades and many hoped that, ceteris paribus, the current team might do likewise.

However, it was not to be. After an unbeaten but uninspiring campaign in the preliminaries, Ireland finished second in her section and qualified for a play-off with France, a footballing giant which was underperforming. The first leg, in Croke Park, was largely disappointing and saw France victorious by a lucky deflected goal. The second leg, in Paris four days later proved a different game. Ireland, needing a victory away from home, abandoned their cautious approach of earlier contests and dominated for much of the game, taking the lead after 30 minutes. The score stayed this way until the end of the regulation 90 minutes and then, since scores over the two games were level, went into overtime.

At a critical point a highly controversial goal was awarded to France after a clear handball assist by the French star player Henri, seen by everybody except the referee and his assistants. The incident was also clearly and unambiguously shown on TV. There was no further scoring and Ireland were out, denied even the opportunity at least to take part in a penalty shootout. Predictably the players and the fans were gutted. Soccer is well known as a game where the referee’s decision is final and also as a game which has up to now rejected the use of modern technology to assist officials with their decisions. There is no “Hawkeye”, there is no review procedure. That, you would think, was that.

Then a departure from the script. Public opinion in Ireland was outraged and refused to let the matter die. Radio and TV stations were swamped with complaints. There were widespread calls for the game to be replayed. The French players in general, and Henri in particular, were branded as cheats. At a higher level, there were dark rumours of a conspiracy by those who ran soccer to ensure that France (a soccer giant) would qualify and Ireland (a soccer minnow) would not.  People who should have known better joined in the chorus. An official complaint was made to FIFA (soccer’s international governing body).  Irish soccer officials reportedly requested that Ireland be invited to participate in the World Cup finals as an extra team.  The display was in some way a metaphor for the reaction of sections of society to the precipitate economic downturn of the last two years. It was unfair, a scapegoat had to be found and the situation rectified!

As I write emotions have cooled and public opinion has become more sanguine. Certainly Ireland were unlucky, having dominated the game in Paris,  but arguably the run which put Ireland into the play-offs was launched by an equally dubious refereeing decision in Ireland’s favour.  In a group game last February Ireland were trailing lowly Georgia – a real soccer minnow -in the closing minutes. The referee then awarded Ireland a penalty for a very dubious handball (the ball actually striking a defender’s shoulder), described by one commentator as scarcely believable. Ireland tied the game and shortly after scored the winning goal. The points gained proved vital later in the group. The coach of Georgia described his players as very angry and added “we did not deserve to lose”.  In both cases, as in many others over the years, the referee’s decision was final. The Irish coach, Giovanni Trapottoni, observed, in effect, that decisions like this happen and that on this occasion Ireland had had the luck. Significantly, Trapattoni was much more muted in his reaction to the Paris defeat than were the Irish players, officials, or sections of the Irish public.

There is no doubt that soccer could do with a good makeover – to include tightening up of discipline on and off the field and proper and severe penalties for downright cheating. There is also a strong case for improving officiating at games either by increasing the number of match officials or using video replays on controversial decisions. Up to now the argument has been that all this would take from the natural flow of “the beautiful game” but with so much at stake and the continued development of technology, it should surely be possible to arrive at some happy medium. At least some good could then come out of the Paris game and its aftermath. As it is, the referee and his officials have been unfairly pilloried, and Thierry Henri, by common consent one of the greatest soccer players of recent years, has had his reputation besmirched. Just last week an English commentator, referring to a hand ball incident, described it as “an Henri moment”.

In conclusion, it is ironic to note that, while Ireland will not be going to South Africa, the USA, Australia and New Zealand will.

IRELAND AND THE IRISH DIASPORA
Ireland is waiting for the Budget, possibly the most important and harshest in the history of the state. It has to address a situation which is unsustainable, where revenue from taxes only covers two thirds of government spending. The country has been running on empty since September. It is sobering to reflect that, since I wrote in the September issue, the government has been obliged to borrow six thousand five hundred million dollars just to keep going, an amount which increases by three million plus every hour.

The debate on what to do, who should pay, and how,  and where Ireland is going as a society has intensified in recent months as denial has begun to give way to a reluctant acceptance of reality. Arguably this debate will lead to a better and more mature understanding at all levels of who and what we are, and, after the Lisbon vote, what our position is in the world of today. One aspect of this could include some redefinition of the relationship between Ireland and the greater Irish nation overseas. I touched last time on the Global Irish Economic Forum held in Dublin in mid-September. This brought together a sizeable number of the great, the good, and the successful from among the Irish diaspora, the name currently in vogue to describe collectively those of Irish descent living outside Ireland. The forum tossed around ideas and initiatives which might assist Ireland in her current situation. The deliberations of the forum make interesting reading and can be accessed through the Department of Foreign Affairs website. Follow-up will be interesting.

The forum was organised by the Irish government but owed some inspiration at least to promptings from the Irish economist David McWilliams, who, as I have written earlier, has argued for some time for a new relationship between Ireland and the overseas Irish family. McWilliams has pointed to Israel and the Jewish diaspora as an example which Ireland might usefully take on board. His basic point, advanced before Ireland fell down its present hole, is that there is huge untapped potential for a fruitful interaction between the two, something that Ireland should not ignore.

The forum can be seen as a significant step in the process of drawing Ireland and the Irish family closer together, at a time when Ireland can do with help from any quarter. It comes several years after the report in 2002 of a special task force on policy towards emigrants entitled “Ireland and the Irish Abroad “. The document, though full of the rhetoric of the Celtic Tiger years, merits reading. It has proved a fruitful basis for subsequent government action, including substantial increases in financial assistance to groups assisting disadvantaged Irish outside Ireland.

The report was drawn up when money was no object and was pitched primarily at the perceived need then at last to do something for Irish emigrants requiring a helping hand, particularly those of the 1950s wave of emigration to Britain. It also addresses the wider issue of Irish communities and those of Irish descent worldwide. It acknowledges that there are a number of different Irish communities in the world, all with specific needs and aspirations, and that, in devising an official policy towards emigrants, one size definitely does not fit all. However, and unavoidably, given its remit, it draws a distinction between Irish citizens and those of Irish descent, with the bulk of its content and recommendations focused on recent emigrants from Ireland with special reference to the vulnerable and those in need of assistance and recognition.

The report falls far short of meeting the high watermark of the suggestions made by McWilliams but it is important, nevertheless. While not fully embracing the “mother ship” concept, it has established a benchmark for future official relations between the Motherland and the greater Irish nation and made a number of useful observations and recommendations.  In citing Article 2 of the Irish Constitution ,with its reference to the Irish nation cherishing its’ “special affinity with people of Irish ancestry living abroad”, and in its follow-up references, arguably it has begun the process of fleshing out just how to support those wishing to express and share the Irish dimension of their identity. Fully to do justice to this topic would require a separate report.

I would like to touch briefly on some of the issues broached in the report and which crop up whenever the subject of Ireland and the Irish abroad comes up. A central issue is that of citizenship and recognition. There is no halfway house where Irish citizenship is concerned. Every Irish citizen has the same rights, with the proviso that, in terms of voting and taxation, rules of residence apply. The Irish constitution provides quite generous access to citizenship, even if in recent years some of the provisions have been tightened. However, there is a clear cut off point at grandparent level, which, while making practical sense, excludes crudely most of the great family of Irish Americans, whose Irish origins stretch back further.

The unique nature of Irish emigration, proportionately far larger historically than any other, leaves little scope for future expansion of access to citizenship through descent.  For consideration, in my opinion, is whether or not some form of statutory recognition of Irish origin could be introduced, which would confer recognition and some advantages to those qualifying, but would fall short of actual citizenship. It could perhaps be hung upon the reference in the Constitution to “special affinity”.  While the practicalities of this may be difficult, at a time when Irish membership of the European Union involves giving access and advantages to those from other EU countries, it is surely appropriate to contemplate doing something for our own.

For those already citizens the issue of the right to vote in Irish elections arises. This issue raises particular emotions among many recent emigrants, who feel they have been driven to emigration and consider they should have a right to redress through the ballot box. The more detached acknowledge the practical difficulties and accept the logic of the argument  that voters must be resident, together with the additional point that there should be no representation without taxation. (The issue of taxation of Irish people living abroad has resurfaced this year but purely as a domestic issue aimed at certain high-profile personalities on the Irish scene who pay no Irish tax.) For consideration here, and the report refers to it, is whether some seats in the Irish Senate could be reserved for representatives of emigrants.

The report suggests giving recognition for Irish achievement overseas through the establishment of an annual awards scheme. This idea has some merit with regard to high achievers but misses the point of doing something for all. Moreover, the fact that Ireland has no honours system for achievers within Ireland means that any movement on this for the Irish abroad will not be in the short term. The British award to Teddy Kennedy shortly before his death, threw into sharp relief our inability to do likewise. On this, as on much else, swift action is needed.

— 6ytyt

TWO CHEERS FOR DEMOCRACY
Some good news at last. The second Lisbon referendum was won decisively by the “Yes” side. A hurdle on the road to national recovery has been successfully cleared. Taoiseach Brian Cowan, mugged last year by the earlier No vote, can now focus on the Economy. The final vote was two to one in favour, 1,214,268 to 594,606. The yes vote rose by 360,000, the no fell by 268,000. The total vote was up by 195,000, and the turnout, at 58% was higher than in any of the previous votes on Europe (six) since 1972.

A vigorous campaign was mounted by the Yes side. Of particular note also was the role of the Chairman of the (neutral) Referendum Commission, Judge Frank Clarke, whose clear and concise contributions on radio did much to dispel fears and misapprehensions among the public. However, a reality check. It should not be overlooked that a third or so of the electorate remains stubbornly opposed to strengthened links with Europe and that, in numerical terms, this group continues to grow.  The figure opposing Lisbon Two was 60,000 more than that opposing Nice Two.  Winning them over seems a forlorn hope. “Getting out the vote” will remain, therefore, of major importance to the pro-Europeans.

The experience also shows that Ireland needs another, major, reality check where relations with the European Union are concerned. Ireland is not at the heart of Europe, as is constantly claimed; if we were, our history would have been far different. The EU was founded on a Franco-German axis and the economic and political weight of the EU remains roughly situated around this core. Ireland is a small country on the periphery, with less than 1% of the EU’S population, which has enjoyed very substantial cash and capital transfers from Brussels (i.e. from other member states) over three decades. This money has in the main been put to good use and has been largely instrumental in hauling our living standards up to European levels. This era is now over, with the arrival of newer, poorer states from Central Europe.

Europe nevertheless remains of the utmost importance to Ireland, in terms of market access, the toleration of our business-friendly tax regime and the social fabric and progressive legislation which has flowed from Europe. More than that, Ireland is embedded in the European project, which is an inclusive rather than a “them and us” relationship. Fundamental to this is a collegiate approach to issues, so that vital national interests are not trodden upon (in our case neutrality and investment incentives), and the “national veto” is never invoked. Ireland has benefitted enormously from this European inclusivity which has given us both a voice and an audience. The picture is completed by the succour that our economy has received over the last year, which has seen the European Central Bank keep us afloat financially, as a member of the European family.

This almost unique relationship was jeopardised by the initial no vote on Lisbon and would have suffered seriously by a repeat. Up to then Ireland was seen as an EU success story and was the recipient of much good will from our European partners. These partners, particularly the ones who picked up the tab, regarded the first vote with incredulity, given the benefits Europe has brought Ireland. Their indulgence and patience would have been sorely tried by another no.  What would have been seen as wilful disregard of the nation’s self interest would lead to a cooling of affection by our partners. Nothing precipitate would happen right away. The EU would muddle through. But Ireland would have slipped from her “most favoured nation” status to one regarded as an awkward marginalised partner.  The yes vote has prevented this, but we will still have to re-establish our credentials and bona fides with a Europe which has greater issues and problems to confront.

Another reality check is required with regard to the economy, where denial persists regarding the extent of Ireland’s fiscal crisis. For many this is still somewhat of a phoney war despite the sharp tax hikes and the promise of more to come. The reaction to suggested welfare, health and education cuts has been disbelief, anger and a demand that scapegoats (i.e. someone else) be found to pay. The suggestion of wage cuts in the public sector (where jobs are guaranteed) has provoked fury and threats of strikes. Each special interest group has been vocal in defending its patch. Meanwhile the Government continues to borrow over $500 million per week.  Revelations of lavish expenses claimed by politicians, leading to one high profile resignation, have fuelled public anger and distracted from the reality of the economic crisis.

For some the phoney war is set to hot up. A large and increasing number of house owners are now in negative equity as property prices continue to fall. Negative equity does not matter in the short run as long as the mortgage is paid, but where jobs are lost repossession looms. This year has seen a trickle; 2010 promises a stream if not a flood as the banks cease to be “nice guys”. By then a scheme to bail out the banks – by diverting bad developer-loans – will be up and running. Nothing has been mooted regarding a bail out for home owners in trouble and this issue may well move to political centre stage next year. But first there is the December Budget which will certainly concentrate minds.

There are signs that the economy is indeed bottoming out, with unemployment flattening, some categories of exports booming, and the decline in government tax revenue almost halted .One central bank official recently described the economy as “bubbling along at the bottom”.  In the property sector this appears to be happening, at reductions of up to 50% from the peak. There are cautious official forecasts of a return to economic growth in 2011. However, even if this happens, recovery is likely to be lengthy and arduous.  It will be many years before the jobs lost are regained. Barring inflation, property prices are unlikely ever to reach the dizzy heights of 2006. Emigration has officially restarted, despite continuing immigration, but the economic situation elsewhere offers no solution to Ireland’s jobless.

One solution, though not in the short term, may emerge as a result of an event which took place in Dublin in mid-September. The Global Irish Economic Forum saw a gathering of almost 200 prominent international business and cultural figures of Irish birth or heritage. The Forum was at the invitation of the Irish Government, taking up an idea put forward by the economist David McWilliams, who has argued for some time for more interaction between Ireland and the Irish Diaspora. The idea behind the weekend meeting was to explore how the energies and expertise of those worldwide with an Irish connection might be harnessed fruitfully on Ireland’s behalf.  A report with follow up recommendations will be made to the Government. There is tremendous affection and good will for Ireland out there among the Diaspora. God knows Ireland need it!